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Notes Payable, net | 9 Months Ended
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Sep. 30, 2017
Debt Disclosure [Abstract] |
Notes Payable, net | Notes Payable, net The following table sets forth information with respect to the amounts included in notes payable, net as of:
| September 30, 2017 |  | December 31, 2016 |  | Interest Rate(1) |  | Contractual Maturity Date |
UNSECURED NOTES PAYABLE |  |  |  |  |  |  |  |
Unsecured Revolving Credit Facility(2) | $ | 250,000 |  |  | $ | 300,000 |  |  | LIBOR + 1.15% to 1.85% |  | 4/1/2019 | (3)
5-Year Term Loan due April 2020(2)(4) | 450,000 |  |  | 450,000 |  |  | LIBOR + 1.30% to 2.20% |  | 4/1/2020 |
5-Year Term Loan due November 2020(2) | 175,000 |  |  | 175,000 |  |  | LIBOR + 1.30% to 2.20% |  | 11/17/2020 |
7-Year Term Loan due April 2022(2)(5) | 350,000 |  |  | 350,000 |  |  | LIBOR + 1.60% to 2.55% |  | 4/1/2022 |
7-Year Term Loan due November 2022(2)(6) | 125,000 |  |  | 125,000 |  |  | LIBOR + 1.60% to 2.55% |  | 11/17/2022 |
Series A Notes | 110,000 |  |  | 110,000 |  |  | 4.34% |  | 1/2/2023 |
Series E Notes | 50,000 |  |  | 50,000 |  |  | 3.66% |  | 9/15/2023 |
Series B Notes | 259,000 |  |  | 259,000 |  |  | 4.69% |  | 12/16/2025 |
Series D Notes | 150,000 |  |  | 150,000 |  |  | 3.98% |  | 7/6/2026 |
Series C Notes | 56,000 |  |  | 56,000 |  |  | 4.79% |  | 12/16/2027 |
TOTAL UNSECURED NOTES PAYABLE | 1,975,000 |  |  | 2,025,000 |  |  |  |  |  |
SECURED NOTES PAYABLE |  |  |  |  |  |  |  |
Rincon Center(7) | 98,896 |  |  | 100,409 |  |  | 5.13% |  | 5/1/2018 |
Sunset Gower Studios/Sunset Bronson Studios | 5,001 |  |  | 5,001 |  |  | LIBOR + 2.25% |  | 3/4/2019 | (3)
Met Park North(8) | 64,500 |  |  | 64,500 |  |  | LIBOR + 1.55% |  | 8/1/2020 |
10950 Washington(7) | 27,549 |  |  | 27,929 |  |  | 5.32% |  | 3/11/2022 |
Pinnacle I(9)(10) | 129,000 |  |  | 129,000 |  |  | 3.95% |  | 11/7/2022 |
Element LA | 168,000 |  |  | 168,000 |  |  | 4.59% |  | 11/6/2025 |
Pinnacle II(10) | 87,000 |  |  | 87,000 |  |  | 4.30% |  | 6/11/2026 |
Hill7(11) | 101,000 |  |  | 101,000 |  |  | 3.38% |  | 11/6/2026 |
TOTAL SECURED NOTES PAYABLE | 680,946 |  |  | 682,839 |  |  |  |  |  |
TOTAL NOTES PAYABLE | 2,655,946 |  |  | 2,707,839 |  |  |  |  |  |
Held for sale balances(10) | (216,000 | ) |  | (216,000 | ) |  |  |  |  |
Deferred financing costs, net(12) | (15,588 | ) |  | (18,516 | ) |  |  |  |  |
TOTAL NOTES PAYABLE, NET(13) | $ | 2,424,358 |  |  | $ | 2,473,323 |  |  |  |  |  |
_________________
(1) | Interest rate with respect to indebtedness is calculated on the basis of a 360-day year for the actual days elapsed. Interest rates are as of September 30, 2017, which may be different than the interest rates as of December 31, 2016 for corresponding indebtedness.
(2) | The Company has the option to make an irrevocable election to change the interest rate depending on the Company’s credit rating. As of September 30, 2017, no such election had been made.
(3) | The maturity date may be extended once for an additional one-year term.
(4) | Effective July 2016, $300.0 million of the term loan was effectively fixed at 2.75% to 3.65% per annum through the use of two interest rate swaps. See Note 10 for details.
(5) | Effective July 2016, the outstanding balance of the term loan was effectively fixed at 3.36% to 4.31% per annum through the use of two interest rate swaps. See Note 10 for details.
(6) | Effective June 1, 2016, the outstanding balance of the term loan was effectively fixed at 3.03% to 3.98% per annum through the use of an interest rate swap. See Note 10 for details.
(7) | Monthly debt service includes annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.
(8) | This loan bears interest only. Interest on the full loan amount was effectively fixed at 3.71% per annum through the use of an interest rate swap. See Note 10 for details.
(9) | This loan bears interest only for the first five years. Beginning with the payment due December 6, 2017, monthly debt service will include annual debt amortization payments based on a 30-year amortization schedule with a balloon payment at maturity.
(10) | The Company owns 65% of the ownership interests in the consolidated joint venture that owns the Pinnacle I and II properties. The full amount of the loan is shown. The Company entered into an agreement on September 14, 2017 to sell its ownership interest in the consolidated joint venture that owns Pinnacle I and Pinnacle II. The sale is expected to close in the fourth quarter of 2017. These properties meet the definition of properties held for sale.
(11) | The Company owns 55% of the ownership interest in the consolidated joint venture that owns the Hill7 property. The full amount of the loan is shown. The maturity date of this loan can be extended for an additional two years at a higher interest rate and with principal amortization.
(12) | Excludes deferred financing costs related to properties held for sale and amounts related to establishing the Company’s unsecured revolving credit facility.
(13) | Excludes amounts related to a public offering of senior notes that closed October 2, 2017.
Current year activity On September 14, 2017, the Company entered into an agreement to sell its ownership interests in the consolidated joint venture that owns the Pinnacle I and Pinnacle II properties to certain affiliates of Blackstone for $350.0 million, before credits, prorations and closing costs, including the assumption of $216.0 million of secured notes payable. The loan balance related to these properties as of September 30, 2017 and December 31, 2016 is reflected in liabilities associated with real estate held for sale in the Consolidated Balance Sheets. On October 2, 2017, our operating partnership completed an underwritten public offering of $400.0 million in senior notes due November 1, 2027. The notes were issued at 99.815% of par, with a coupon of 3.950%. The notes are fully and unconditionally guaranteed by the Company. The net proceeds from the offering, after deducting the underwriting discount and offering expenses, were approximately $396.7 million, which was used to repay $150.0 million of the Company’s 5-year term loan due April 2020 with the remainder of the net proceeds, together with cash on hand, used to fully repay the $250.0 million balance outstanding under the Company’s unsecured revolving credit facility. Indebtedness The Company presents its financial statements on a consolidated basis. Notwithstanding such presentation, except to the extent expressly indicated, such as in the case of the project financing for Sunset Gower Studios and Sunset Bronson Studios, the Company’s separate property-owning subsidiaries are not obligors of the debt of their respective affiliates and each property-owning subsidiary’s separate liabilities do not constitute obligations of its respective affiliates. Loan agreements include events of default that the Company believes are usual for loan and transactions of this type. As of the date of this filing, there have been no events of default associated with the Company’s loans. The following table summarizes the minimum future principal payments due (before the impact of extension options, if applicable) on the operating partnership’s secured and unsecured notes payable as of September 30, 2017:
Year |  | Annual Principal Payments
Remaining 2017 |  | $ | 821 |
2018 |  | 101,157 |
2019 |  | 257,886 |
2020 |  | 692,493 |
2021 |  | 3,142 |
Thereafter |  | 1,600,447 |
Total(1) |  | $ | 2,655,946 |
_________________
(1) | Includes balances related to properties that have been classified as held for sale.
Unsecured Revolving Credit Facility The operating partnership’s unsecured revolving credit facility is amended from time to time. The terms of the arrangement are more fully described in the Company’s 2016 Annual Report on Form 10-K. The Company uses the unsecured revolving credit facility to finance the acquisition of other properties, to provide funds for tenant improvements and capital expenditures and to provide for working capital and other corporate purposes. The following table summarizes the balance and key terms of the unsecured revolving credit facility as of:
| September 30, 2017 |  | December 31, 2016
Outstanding borrowings | $ | 250,000 |  |  | $ | 300,000 |
Remaining borrowing capacity | 150,000 |  |  | 100,000 |
Total borrowing capacity | $ | 400,000 |  |  | $ | 400,000 |
Interest rate(1) | LIBOR + 1.15% to 1.85%
Facility fee-annual rate(1) | 0.20% or 0.35%
Contractual maturity date(2) | 4/1/2019
_________________
(1) | The rate is based on the operating partnership’s leverage ratio.
(2) | The maturity date may be extended once for an additional one-year term.
Debt Covenants The operating partnership’s ability to borrow under its unsecured loan arrangements remains subject to ongoing compliance with financial and other covenants as defined in the respective agreements. Certain financial covenant ratios are subject to change in the occurrence of material acquisitions as defined in the respective agreements. Other covenants include certain limitations on dividend payouts and distributions, limits on certain types of investments outside of the operating partnership’s primary business and other customary affirmative and negative covenants. The following table summarizes existing covenants and their covenant levels, when considering the most restrictive terms:
Covenant Ratio |  | Covenant Level
Leverage ratio |  | maximum of 0.60:1.00
Unencumbered leverage ratio |  | maximum of 0.60:1.00
Fixed charge coverage ratio |  | minimum of 1.50:1.00
Secured indebtedness leverage ratio |  | maximum of 0.45:1.00
Unsecured interest coverage ratio |  | minimum of 2.00:1.00
The operating partnership was in compliance with its financial covenants as of September 30, 2017. Repayment Guarantees Sunset Gower Studios and Sunset Bronson Studios Loan In connection with the loan secured by the Sunset Gower Studios and Sunset Bronson Studios properties, the Company has guaranteed in favor of and promised to pay to the lender 19.5% of the principal payable under the loan in the event the borrower, a wholly-owned entity of the operating partnership, does not do so. As of September 30, 2017, the outstanding balance was $5.0 million, which results in a maximum guarantee amount for the principal under this loan of $1.0 million. Furthermore, the Company agreed to guarantee the completion of the construction improvements, including tenant improvements, as defined in the agreement, in the event of any default of the borrower. If the borrower fails to complete the remaining required work, the guarantor agrees to perform timely all of the completion obligations, as defined in the agreement. As of the date of this filing, there has been no event of default associated with this loan. Other Loans Although the rest of the operating partnership’s loans are secured and non-recourse, the operating partnership provides limited customary secured debt guarantees for items such as voluntary bankruptcy, fraud, misapplication of payments and environmental liabilities. Interest Expense The following table represents a reconciliation from the gross interest expense to the amount on the interest expense line item in the Consolidated Statements of Operations:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2017 |  | 2016 |  | 2017 |  | 2016
Gross interest expense(1) | $ | 24,107 |  |  | $ | 21,726 |  |  | $ | 70,345 |  |  | $ | 59,911 |
Capitalized interest | (2,831 | ) |  | (2,960 | ) |  | (7,817 | ) |  | (8,414 | )
Amortization of deferred financing costs and loan premium, net | 1,185 |  |  | 1,144 |  |  | 3,558 |  |  | 3,278 |
Interest expense | $ | 22,461 |  |  | $ | 19,910 |  |  | $ | 66,086 |  |  | $ | 54,775 |
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(1) | Includes interest on the Company’s notes payable and hedging activities.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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